by Dana George | Updated July 21, 2021 - First published on Feb. 8, 2020
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Becoming debt-free is wonderful, but there are unexpected dangers to avoid.
It’s a wonderful thing to be able to say you are newly debt-free. Paying off your debt is like being handed a blank piece of paper on which to write the next chapter of your life.
However, the first few months after becoming debt-free can be fraught with temptation and financial danger. Here are a few hazards to look out for -- and how to avoid them -- as you cast off the shackles of debt. There are even some steps you can take now, while you’re still paying off what you owe.
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Becoming debt-free after years of work and worry is liberating. You may want to celebrate as you savor your new debt-free status. But be careful not to over-celebrate. If you've ever lost weight and celebrated by eating anything you wanted until you gained all those pounds back, you understand what a slippery slope this can be.
Here are a few things you can do to prevent yourself from over-celebrating:
For many of us who become debt-free, the last step is the toughest. We thought that we were going to have nothing but freedom the moment we made that final payment, yet here we are, thinking of all the other things we need to do with our money. This may be what the word "adulting" refers to.
Once you become debt-free, those around you may feel comfortable asking you for money. Some people see becoming debt-free as a great excuse to spend money and are happy to help you do so. Your children, spouse, significant other, and/or friends could very well surprise you with their lack of understanding. They may not realize that saying no to them does not mean you don't care; it simply means you have a plan for your future and that plan does not include going back into debt. Before agreeing to give someone money, ask yourself these three questions:
No matter what anyone tells you, do not ever hand money over with the belief that you will be paid back. What you consider a loan someone else may consider a gift. Sometimes, saying no is more loving than saying yes and then resenting it.
Creditors love two kinds of borrowers: those who don't need money and those with a proven track record of paying their bills in full. You are going to receive offers for credit through the mail, in your inbox, and via phone calls. You are now a creditor's ideal customer. And unless you're made of steel, you will occasionally be tempted to take them up on their offers.
If you're confident that you can take on a new credit card and work it for the benefits, do so. Just make sure you can pay it off in full each month in order to maintain your debt-free status.
Here’s where your debt journal will come in handy. Think back to when the weight of your debt felt suffocating and when it impacted the quality of your life.
Now, ask yourself if owning a new "thing" could ever feel as good as being debt-free.
We suspect the answer is no. Just as debt once held you back, being debt-free offers you the opportunity to write your future anyway you'd like.
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